What is Keeping Me from a Perfect Credit Score?

Does anyone know ANYONE with a perfect credit score? Is that even possible? Well of course it is, but what are the right moves you have to make to get there?

Recently during our refinance, I got to find out the credit score for my wife and I. But that wasn’t all. In addition, I was also given a full report that includes a breakdown of every reason why I lost points.

I decided it would be worthwhile to examine these reasons and see where I blew it. So for your amusement, I have posted the exerts below and we’ll review each of the reasons they listed.

A Quick Review of the Credit Score Ranges:

As everyone knows, the higher your credit score, the better. Here are the ranges of scores you can get on your credit report:

• Experian: 320 – 844

• Equifax: 334 – 818

• Transunion: 309 – 839

How We Did:

For starters, I’d like you to know that my wife and I have no special “credit score strategies”. We simply pay our credit cards and bills off in full, on-time, every time.

With that said, I’m very happy to report my wife and I scored very well on that simple premise. Here are the results from each of our reports:

Where We Went Wrong:

So what kept my wife and I from a perfect score from all three credit reporting agencies? Here are the factors that negatively impacted our scores:

• “Time since most recent account opening is too short” or “Too many accounts recently opened” (all three). I am a multiple offender of applying for a credit card simply because it had a great cash back program or sign-up offer. We also take advantage of “0 % interest” cards where we can take 12 to 48 months to payoff big-ticket purchases. To improve this one, it looks like we’ll need to take it easy on applying for new credit lines.

• “Ratio of balance to limit on bank revolving or other rev accts too high” (Experian, Transunion). The amount of revolving credit balance (the amount of money we owe each month) is too high by each of the agencies standards. This is probably true because we put EVERYTHING on our credit cards in an effort to max out our cash-back. To fix this one, it looks like I have two options: 1) use my credit cards less or 2) qualify for higher balances. But watch out! I have also heard that requesting higher balances may also impact your score.

• “Length of time revolving accounts have been established” (Transunion). This one goes back to having too many new credit cards and loans. It would help if we stopped closing accounts, taking on new ones, and let some of our accounts age a little.

• “Too many consumer finance company accounts” (Equifax). Basically we have too many credit cards from too many random sources. At some point it may be wise to consolidate our accounts to just a few well-known cards. But again, watch out! Closing credit accounts will increase my debt-to-credit utilization ratio which will also negatively affect my account.

• “Too many accounts with balances” (All three). This is similar to the previous bullet – too many accounts open. Again, I’ll have to weigh the benefits of either consolidating or keeping them open keep my debt-to-credit utilization ratio down.

• “Too many credit report inquiries” (all three). I’ve recently had too many people pull my credit history for both our refinance and for a “0% interest” credit card. In general, having too many people look up your credit history is a red flag for creditors. If I want to improve this, I should limit the number of times people do this. This should be easy to do in the future because I do not have any significant purchases coming up.

• “Lack of recent installment loan information” (Transunion). Not sure about this one. It looks like whoever applied for this one didn’t enter everything properly. The fact that it only showed up as an issue with Transunion makes me suspicious. I’ll need to look further into this one.

Understanding Your Credit Score:

Rather than reinvent the wheel, there are a lot of great financial blogs out there that have some good posts about how to improve your score. Please feel free to check out the following:

we are in the process of buying a home. Our credit score is excellent (770-790). They were not that good in years prior, but we have just been very good at paying the cards off on time and not aqcuiring any new debt. We kept our accounts open to keep the credit history also. My question is if you do not use the credit card, will it be held against you to just keep the account “dormant”?Ron @ Running From Debt recently posted..Money Talk With the Wifey

Surprisingly, no! I was surprised to learn that its actually worse for your credit score to close your cards (because it lowers your available credit) than to keep them open and not use them. You would think it would be the other way around since closing your account when you no longer use it is the responsible thing. All the same, if you have a great score, I’d still close a dormant account just on the fear of it getting stole from identity theft and used without you even knowing anything is going on.

Your solutions to the “too many balances” and “credit ratios too high” are not quite right. You don’t need to increase your limits or stop using your cards to solve those problems. Instead you can simply pay off most of your card balances in full before your statement dates. This gives you a “pays as agreed” on your report without having a balance owed – since the statement balances are what the banks report to the credit agencies. However, you don’t want to pay off *every* card before the statement, because having no balances owed at all actually hurts your score also. As a general rule you should let 2 or 3 cards have balances on their statement dates, but never let those balances be above 30% of the limit for each card. I know this from lots of research. I’ve played the game this way for years and have a FICO of 846/850 at the age of 32.

More Lifestyle

Archives

Archives

My Money Design is for entertainment and reference purposes only. The information presented is the opinion of the author only and should not be interpreted as specific advice or recommendations towards your financial situation. Always consult with a true professional before making any financial decisions.

Affiliate Disclaimer: My Money Design may be compensated for our personal opinions, reviews, and affiliate relationships with some of the featured products and services. Google Adsense and Amazon Associates are examples of such relationships. Such content, advertising space or posts may not always be identified as paid or sponsored content. All offers or claims are subject to change without notice and should be verified with the manufacturer, provider or party in question.